Now a days every company offers the facility of PF or EPF (Employees’ Provident Fund Scheme 1952) and EPS (Employees’ PensionScheme 1995). They are the two different retirement saving schemes under the EPF or Employees’ Provident Funds and Miscellaneous Provisions Act, 1952. This is meant for salaried employees. Employees’ pension helps an employee to secure their future.
EPF & EPS:
EPF and EPS are the retirement benefit schemes that can help you to secure your life after your retirement. It is applicable for all government and private sectors employees. It is mandatory for every employee to make contribution towards EPF & EPS who are drawing a basic pay of up to Rs. 6,500 per month. However, employees who are drawing a basic salary that is over Rupees 6,501per month have an option to get PF deducted from their salary.
EPF accountis a retirement benefit that is applicable only for salaried employees. EPF contribution is a fund to which the employer and employee both monthly contribute 12 percent of the basic salary. This percentage is pre-set by the government. Out of the total 12%, 8.33% of the employer’s contribution is diverted to the pension scheme or EPS and the 3.67% balance goes in EPF pension.
If the basic monthly payment of an employee exceeds Rs. 6,500, then the contribution towards pension scheme is restricted to 8.33%.
Contribution to EPF & EPS
|Contribution to EPF & EPS|
EPF interestandEPS interest:
With the consultation of Central Board of Trustees, Central government has decided the EPF interest rate. It is available on the official website of EPF India. The interest calculated on EPF is 8.6% for FY12-13 and the contribution is made on monthly basis. At the end of every financial year interest is calculated. There would be an opening balance that is the amount accumulated till then.
The opening balance calculations for the next fiscal: Previous opening balance + monthly contribution throughout the year + interest.
The interest is paid on 1 April every year for EPF account. As EPS account is a pension scheme, interest is not applicable. So in EPS no interest is earned on the amount accumulated.
Conclusion: EPF and EPS both are pension scheme that helps you to secure after retirement life. It is mandatory for every government and non-government employees to have a pension account. EPF and EPS has certain rules and calculations. This article will help you to understand all the rules and regulation of this two pension policies.